In my last article, I wrote about the recent decision by California Public Employees Retirement System (CalPERS) to change the contribution amounts that municipalities will have to pay to reach the goal of having a “fully funded” system by 2045. It was my intent to highlight the CalPERS situation as it affects the entire State. I stated that with more people living longer, public pensions and post-employment benefits will be a growing drain on public funds. My concerns expressed in my article were addressed at a State-wide potential problem – not particularly focused at Foster City. In fact, from discussions with other elected representatives from other cities throughout the State, Foster City appears to be in a much better financial situation than the majority and I have yet to find one in “better” shape.

However, it appears that some readers misunderstood the focus in my last article to be aimed solely at Foster City and its employees, which was certainly not the case. The announcement by CalPERS was so new that the impact on Foster City at the time I wrote the article was not known. So I am following up with information that we now know about the impact that the CalPERS announcement will have on Foster City as well as funding other retirement benefits.

As of the last City Council meeting (Monday, June 3), we now know that as a result of the CalPERS action, Foster City will have an increased cost of nearly $350,000 per year starting in Fiscal Year 2015-16.
Outside of the pension plans provided to employees through CalPERS, there are two other post-retirement benefit plans that prior Councils approved through negotiations with its employee groups, the Longevity Recognition and the Public Employees’ Medical and Hospital Care Act (PEMHCA).

The Longevity Recognition plan was provided as an incentive for employees that dedicate over 10 years of service with the City and retire from the City, and provides monetary benefits based on the length of time they were with the City. However, any employee hired after January 1, 2012 is not eligible to receive benefits from the plan.

It should be noted again that in Fiscal Year 2007-2008 all American Federation of State, County & Municipal Employees (AFSCME) and non-public safety management then currently employed by the City elected to eliminate the Longevity Recognition plan from the employee agreements and are not eligible to receive benefits from those plans. However, current Foster City Police Officers Association (FCPOA), International Association of Fire Fighters (IAFF), and public safety management employees will continue to participate in the plan but new employees in those groups hired after January 1, 2012 are no longer eligible to participate in the program.

The second post-retirement plan is a fixed monthly benefit towards medical costs under the provisions of PEMHCA. The City provides medical benefits to current employees through the separate medical insurance division of CalPERS. By virtue of that relationship, employees who retire from the City may elect to continue medical coverage through PEMHCA after they retire. California State Law requires that any agency who contracts for PEMHCA medical benefits is required to pay a minimum amount towards the medical insurance premiums of current employees and retirees. The minimum monthly premium contribution is currently $115 per month. As a result, the City has a post-retirement obligation for anyone that retires from the City and elects to continue medical benefits through PEMHCA for the minimum monthly amount, which is subject to inflation adjustments as approved by the state legislature in future years.

Bucking the trend of these economic difficult times, there is some good news. The recent actuarial accrued liability for the Longevity Recognition as of June 30, 2013 is projected to be about $2.453 million while the plan’s assets were $3.102 million as of April 30, 2013. The recent actuarial accrued liability for PEMHCA as of June 30, 2013 in projected to be about $4.500 million while the plan’s assets were $5.692 million. This is good news for Foster City as there is a “surplus” in both funds totaling $1.841 million. Since both plans are overfunded, it is expected that the City will not have to make any annual required contributions for the next seven (7) years.

The term “overfunded” certainly has a nice sound to my ears and hope the economy treats us better in the future than it has in the recent past. The problems we face today and in the future will require different approaches. Our senior citizen population will continue to grow at an ever increasing rate and that group will become an increasing percentage of the demographic. We will have to look to new approaches to solving economic problems without bankrupting the system.

I would appreciate your comments on this and other issues by emailing me at akiesel@fostercity.org. or 650-573-7359.